Lloyds Bank PLC

On 4 June 2015, the Authority imposed a financial penalty of £117,430,600 on Lloyds Bank plc, Bank of Scotland plc and Black Horse Limited (LBG) for breaches of Principle 6 (Customers' interests) of the Authority's Principles for Businesses (the Principles). LBG agreed to settle at an early stage of the Authority's investigation. LBG therefore qualified for a 30% (Stage 1) discount under the Authority's executive settlement procedures. Were it not for this discount, the Authority would have imposed a financial penalty of £167,758,035 on LBG. Between 5 March 2012 and 28 May 2013 (the Relevant Period) LBG breached Principle 6 by failing to pay due regard to the interests of its customers, and by failing to treat them fairly when handling complaints from customers who had purchased Payment Protection Insurance ('PPI'). During the Relevant Period LBG assessed customer complaints relating to in excess of 2.3 million PPI policies and rejected 37% of those complaints. In particular: (a) LBG's complaint assessment process included guidance to complaint handlers which directed them to assume that LBG's PPI sales processes were 'compliant and robust', unless notified to the contrary.  This was described to complaint handlers as the 'Overriding Principle'.  The Overriding Principle was unfair to customers because: (i) there was a risk that it created a default assumption that LBG had not mis-sold the PPI policy that an individual customer was complaining about; (ii) customers may not have had the opportunity to provide evidence to enable the complaint handler to reach a fair outcome; and (iii) in some situations it affected the judgements made by complaint handlers who relied on it to rebut credible customer testimony and to not fully investigate customer complaints. (b) LBG failed to take into account information about Sales Process Failings identified from Root Cause Analysis when assessing complaints.  This was unfair to customers because it meant: (i) LBG failed to give balanced consideration to all available evidence; and (ii) the unfair effects of the Overriding Principle were compounded because this evidence was not available to complaint handlers to counter the assumption, created by the Overriding Principle, that LBG had not mis-sold the PPI policy that an individual customer was complaining about. (c) Where LBG complaint handlers relied on the Overriding Principle to reject customer complaints instead of investigating the actual circumstances of the complaint, there was a risk that the final decision letters did not accurately reflect the complaint handler's assessment of the complaint and reasons for the rejection.  This was unfair as it may have dissuaded some customers with valid complaints from providing further information to LBG to challenge the decision, or referring their complaint to the Financial Ombudsman Service. (d) The above failings resulted in a significant number of customer complaints being unfairly rejected. A copy of the Final Notice is displayed on the Authority's web site and can be accessed using the following link: